Arizona Real Estate, Arizona Rental Info

Deciding whether to rent or to a buy a home can be a challenging decision. Many weigh the aspect of “throwing” equity or potential future value away when renting a home. That said there are many other reasons to rent over buying a home and vice versa. Here are some considerations I would recommend when making this type of decision.

Renting a home

The pros of renting a home:

• As a renter you don’t assume any of the major responsibilities of owning a home. Of course you should keep the home in good order; however, you’re not required to replace the broken water heater or maintenance the AC. Your responsibility is to keep the home in good condition less wear and tear.
• Before our current economy no one thought of the values of homes declining, especially in such rapid form. Since this is now a certain possibility, as a home rentor you will not take this potential risk.
• By renting a home you can stay flexible by signing a leas for 6,9, or 12 months, based on your planned stay. At the end of the term you can always re-sign an extended lease or decide to depart to a new location.
• The monthly cost of renting a home can be substantially lower then owning a home, especially with the many home available at present

The cons of renting a home:

• The tax write-off one receives from owning a home can be significant. This is especially true if you just recently purchased your home as lenders front-load your load with interest. So in the beginning a majority of your monthly payment can be deducted. Additionally, your real estate taxes can be deducted from your taxes as well. This can lead to significant tax savings, in particular if you are in a high tax bracket.
• Your monthly payment is effectively locked for the next 15-30 years when you buy a home. As a renter you are subject to increases in your payment at the discretion of your landlord.
• You lose the opportunity to receive a potential increase in value by owning the home.

Buying a home

The pros of buying a home:

• I believe the single most reason people buy a home is because it’s “The American Dream.” There is a sense of emotional satisfaction when you can stand on a piece of your own real property.
• You can do almost whatever you want to your home. Of course you’ll need to make sure it meets your neighborhoods CC&Rs(codes covenants, and restrictions). I know you didn’t read it, neither do most, but as long as it doesn’t violate that or your city’s/town’s building code, go for it.
• Write it off. You know this is probably the 2nd most common reason for buying a home. You can write off every penny of interest and real estate taxes, which can lead to HUGE tax savings.
• Time has proven that your home will “most likely” gain value. This can lead to significant wealth and security; however, as we’ve recently seen this is not always true.

The cons of buying a home:

• You’re responsible to maintain your home, so when it breaks and you didn’t plan for it, you still have to fix it. Air conditions, water heaters, and many other potential issues can arise on a home and they can be very costly to fix.
• Closing costs are thousands of dollars in most cases, so budget accordingly, usually about 1% off of the home value.
• You’ll be forced to pay private mortgage insurance (PMI) if you don’t put 20% or more down.

I hope these help you with making your decision with whether to buy or rent. If you have questions or need to find a real estate professional in your area, please let me know.

You can reach me at lhasson@realestatearizona.com